Multinomial and Conditional Logit Discrete-Choice Models in Demography

Author(s): Saul D. Hoffman and Greg J. Duncan

Source: Demography, Vol. 25, No. 3 (Aug., 1988), pp. 415-427
Published by: Population Association of America
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Demiiograplhy,
Vol. 25, No. 3, August
1988

Multinomialand Conditional
LogitDiscrete-Choice
Modelsin Demography
Saul D. Hoffmnan
Departmentof Economics,University
of
Delaware,Newark,Delaware 19716
GregJ.Duncan
Institute of
forSocial Research,University
Miclhigan,Ann Arbor,Michigan48106

Althoughdiscrete-choice statisticalteclhniqueslhavebeen used with incrcasinig

regularity
in demographic anialyses,
McFaddein'sconiditionial
logitmodelis less well
knownand seldomused. Coniditional logitmodelsare appropriate
wlleiltllechoice
amongalterniativesis modeledas a functioniofthecharacteristics
ofthealterniatives,
ratherthan(or in additionto) thecharacteristics
oftheindividLual
makingtllechoice.
We arguethatthisfeature ofconiditionallogitmakesitmoreappropriate forestimatinig
behavioralmodels. In this article,the coniditionallogit model is-presenitedanid
comparedwiththe morefamiliarmultinomial logitmodel.The differcnice betweenl
thetwotechniquesis illustrated ofthechoiceofmaritalanidwelfare
withanlanialysis
statusbydivorcedor separatedwomeni.

Statistical
techniques forthe analysisof discretechoices have beeinused withincreasinlg
regularityin demographic analyses.I The best known are the binomial logit and probit
techniques,bothofwhichare suitableforbinarychoiceproblems.For problemsinvolving
thechoice amongthreeor morecategories, themultinomial logittechniqueis mostoften
employed;the corresponding probitmodelis used relativelylittlebecause of itscomputa-
tionaldifficulty.Virtuallyunusedthusfaris a closelyrelatedtechniquecalled conditional
logit,a modelthatis wellsuitedforbehavioralmodelingofpolychotomous choicesituations.
DevelopedbyMcFadden(1973),theconditional logitmodelis widelyusedin transportation
demandstudies(see Ben-Akivaand Lerman,1985) but is seldomused in demographic
research.2
Conditionallogit is not simplya different and arguablypreferable techniquefor
estimating thekindof modelsforwhichmultinomial logitis currentlyused. Rather,it is
appropriate classofmodelsin whicha choiceamongalternatives
fora different is treatedas
a functionof the characteristicsof the alternatives,ratherthan (or in additionto) the
characteristicsoftheindividualmakingthechoice.
We believethatmanyproblemsofinterest to demographers and othersocialscientists
can be modeledby usinga "characteristics of the alternative"approach.Thus theyare
appropriately estimatedwithconditionial logit. Furthermore, we suggestthatit is often
toattacha behavioralinterpretation
difficult totheresults ofmodelsthatfocusexclusively on
the"characteristicsof thechooser"-thatis, thoseestimated byconventional multinomial
logit.
The nextsectionofthisarticledescribes thebasicstatistical
propertiesoftheconditional
logit(CLGT) modeland comparesit withthebetterknownmultinomiallogit(MNLGT)
model.3 It also considers
theformoftheunderlyin-g modelsofindividualbehaviorthatlead
(D 1988Populationi
Copyright Associationi
ofAmicrica

415
416 Vol. 25,No. 3, August1988
Demography,

to MNLGT and CLGT estimation. The thirdsectionpresents

a briefdiscussionof some
and estimation
practicalstatistical totheCLGT model.The finalsectionuses
issuesrelating
datafromthePanel StudyofIncomeDynamicsto illustrate betweenthetwo
thedifference
techniquesin appliedwork.We examinedivorcedorseparated women'schoiceamonga set
ofmaritaland welfarestatusalternatives usinga pureMNLGT model,thena pure
byfirst
CLGT model,and thena mixedversionthatincorporates ofboth.
features

Statisticaland ModelingIssues
Both multinomiallogitand conditionallogitare used to analyzethe choice of an
individualamonga setofJalternatives. The centraldistinctionbetweenthetwo,canbe put
verysimply:MNLGT focuseson the individualas the unit of analysisand uses the
individual's as explanatory
characteristics CLGT focuseson thesetof
variables;in contrast,
alternativesforeach individualand the explanatory variablesare characteristics
of those
alternatives.
4
ofthejth
ofindividuali andZi,forthecharacteristics
LetXi standforthecharacteristics
forindividuali, withthecorrespondinig
alternative parameter vectorsdenotedby/3and a,
respectively.Let Jbe the numberof unorderedalternatives (forthe moment,assumed
constantforall individuals) thatindividuali choosesalternative
andPi,theprobability j. The
choiceprobabilitiesin theMNLGT and CLGT modelsare
J
MNLGT: P11= exp(Xi/31) I exp(Xi/3k), (1)
Jk=

CLGT: Pjj = exp(Zija)/ : exp(Zika). (2)

k =j

ofthealternatives
In a mixedmodelthatincludesbothcharacteristics and theinidividual,
the
corresponding canlbe written
probability as
J
Mixed: Pj; = I exp(Xifjl+ Z1jfl)/Cxp(Xi,Pk
+ Zika). (3)
k= I

We discussthemixedlogitmodel(3) further in thenextsectionand estimatesucha model

in thelastsectionofthisarticle.5
Note thesymmetry in equations(1) and (2). In theMNLGT model,theexplanatory
variables(X), being characteristics of the individual,are themselvesconstanit acrossthe
alternatives.
Consequently, theonlywaytheycan affect choiceprobabilitiesis byhavinga
differentimpacton thevariousalternatives. Thus in practice,MNLGT estimatesa set of
J- 1 coefficients ((31)foreach explanatory variable.The estimatedcoefficients showthe
effectof the X variablesonithe probability of choosingeach alternative relativeto one
alternativethatservesas a commonbenclhmark. Thereare onlyJ- 1 coefficients, because
the scalingof the coefficientsis arbitrary.Thus it is necessaryto normalizeon one set of
coefficients,typicallyby settingit equal to zero. For thisalternative, the correspondinig
probabilityis 1/Eexp(Xi,/31),since,3 = 0 and exp(O)= 1.
In contrast,in theCLGT model,theexplanatory variables(Z) assumedifferent values
in each alternative (notethepresenceofa j subscript on Z butnotX), buttheimpactofa
unitofZ is usually,althoughnotnecessarily, assumedtobe constan-t In
acrossalternatives.
thatcase, onlya singlecoefficient is estimated foreachZ variable,so theimpactofa variable
Multinomialand ConditionalLogitModels 417

on the choice probabilities derivesfromthe differencein its value acrossalternatives.

Consequently,in the standardCLGT formulation, a Z (or X) variablewithno variation
When such variablesare deemed
has no impacton choiceprobabi1ities.
acrossalternatives
to be important,themixedmodelis required.
The basic difference betweenthe MNLGT and CLGT formulations is clearerwhen
bydividingthrough
equations(1) and (2) are rewritten bythenumerator:
J
MNLGT: P1j= 1 I exp[Xi(3k - Pi)], (4)
/k=l

CLGT: P1j= 1 E exp[(Zik - Zj)aj. (5)

k=i

Here, the probabilityin equation(4) dependson the difference in the coefficients

across
whereasin equation(5), theprobability
alternatives, dependson thedifferences in thevalue
ofthecharacteristicsacrossalternatives.
The difference betweentheMNLGT and CLGT modelsis notmerelyone ofstatistical
form.The choice probabilities in equations(1) and (2) reflectthe underlying modelsof
individualbehaviorthatnecessarily reflecthypotheses aboutthebasison whichindividuals
makechoicesamongalternatives. Oftenthisis notmadeexplicit,and researchers moveto
theirempiricalestimation withoutfirstspecifying theunderlying behavioralmodel.In fact,
however,it is a crucialstepfortheinterpretation oftheempiricalresults.
Let Vi, standforthe value (utility)of alternativej to individuali, and assume,as a
behavioralrule, thatan individualchooses his or her most highlyvalued alternative.
SupposethatVii dependson theattributes ofthealternatives (Z1)through someunspecified
functionalform(fi). Then thechoiceproblemcan be represented bya pairofequationsas
follows:

vil
=
f(Ziv), (6)

Pi, = Pr(Vi, > Vik) all k notequal to j. (7)

definederrorterm,6equation(6) leadsto theCLGT

Withtheadditionofan appropriately
modelratherthantheMNLGT model,sincethecharacteristics ofthealternativesare the
ofchoice. The estimated
determinants parametersoffi provideinformationnotonlyabout
throughequation(2) butalso aboutthevalue function
thechoiceprobabilities in equation
(6).
The specificformofequation(6) will,ofcourse,varywiththenatureoftheproblem
and the discipline.Economists,forexample,virtually alwaysregardutilityas a function
primarily of an individual'slevel of consumption (definedbroadly)or, equivalently,the
exogenousincomeand thesetofpriceshe or she faces.Viewedin thisway,equation(6) is
a statement aboutthefunctional relationshipbetweenthecharacteristics ofthealternatives
(theZi,'s) and theutilityofeach alternative to theindividual(theVq1's)-inshort,a utility
function.Equation(7) represents thewell-known principleofutilitymaximization applied
to a discrete choiceproblem.We estimate a versionofequation(6) in thelastsectionofthis
article.
Noneconomicmodelsbased on equation(6) could also be formulated, althoughwe
knowof no attempts to do so. For example,a choice modelof becomingmarriedversus
remaining singlemightviewthevalueofthesetwoalternatives as a functionoftheeconomic
security, companionship, independence, and otherattributes thateach provides,withthe
418 Vol. 25,No. 3, August1988
Demography,

perceivedextentoftheseattributes in each alternativeobtainedthrough surveyquestions.To

avoidproblemswithrespondents' rationalizing pastdecisions,a usefulresearch designmight
be a two-wave panelin whichtheattitudinal information is ascertainedin thefirst
waveand
the behavior(e.g., transition to marriage)is measuredin the second. Thus reportsby
unmarried respondents abouttheattributes ofthevariousmaritalstatesin a first wavecould
be used to predicttheprobability ofmarriagein a follow-up interview.
Anotherexamplewouldbe a child-carechoice modelin whichthe value of a given
child-caremodel (e.g., day care, sitterin own home) is taken to be a functionof
such as itslikelyeffect
characteristics on childdevelopment, itscost,and itsreliability.
Note thatin thesetwo examplesthe perceivedor objectivecharacteristics of each
alternativeratherthan its subjectiveimportance or satisfaction are used to explain an
individual'schoice. The statisticalmodel would then provideinformation (i.e., the
estimatedcoefficients) about the relativevalue that individualsplace on the various
characteristics,
inferred fromtheiractualbehavior.
What behavioralmodel leads to MNLGT estimation? In general,MNLGT will be
appropriate whenequation(6) is replacedwith
= f2(Xi)7 (8)
Vi

wheref2is some unspecified functionrelatingXi to Vii. In equation(8), the value of an

is regarded
alternative as a functionofthecharacteristicsofthe individual.Assumingthat
equation(7) stillholds,equation(8) thenleadsto MNLGT estimation.
Multinomiallogitcan also be shownto represent a nonbehavioral,reduced-form
versionofequations(6) and (7). Ifequation(6) holdsbut

zi, = g(Xd, (9)

then
Vij= h(Xi). (10)

Equation (10) relatesthe value of the jth alternative of the ith

to the characteristics
individual,butwithoutincludingthecharacteristics ofthejthalternative.
In a sense,the choice betweenMNLGT and CLGT is the choice betweena model
represented by eitherequation(8) or equation(10) and one represented by equation(6).
Although thereis,ofcourse,no generalruleaboutwhichis preferable, we thinkthata model
basedon equation(6) and utilizingequation(7) has muchto recommendit. The general
notionthatstructural modelsarepreferable toreduced-form modelsis one argument in favor
of equation(6) and CLGT estimation insteadof equation(10) and MNLGT estimation.
Even thoughmodelssuch as equation(8) mayprovidedirectand usefulinformation about
whichindividuals makewhichchoices,theyare oftennotwellsuitedto testing hypotheses
aboutwhythosechoicesaremade. Indeed,theinterpretation ofmodelssuchas equation(8)
oftenmakereference to the (untested)characteristicsof alternatives
availableto particular
individuals.
Models such as equation(6) are especiallywellsuitedfortheanalysisof situations in
which government policyaffects of an alternative
the attractiveness by changingsome
relevantcharacteristic.Examplesincludethe Aid to FemalesWith DependentChildren
(AFDC) program, whichprovidesincometo female-headed familieswithchildren;schol-
arshipaid forhighereducation,whichmaymakecollegeattendancemoreattractive; and
subsidiesfordaycare,whichmayincreasethelaborforceactivity ofwomen.To assessthe
effectofgovernment policiesliketheseon individualchoices,itis necessary, whenpossible,
to includethe policyparameters directlyin the choice problem.Since theseparameters,
though,aretypically ofthealternative
a characteristic in question,a conditionallogitmodel
such as eauation(6) is theaDDroDriatemodel.
Multinomialand ConditionalLogitModels 419

StatisticalProperties
and EstimationIssues
In thissection,we presenta briefsurveyof some of the practicalstatistical
issues
involvedin theestimationoftheMNLGT and CLGT models.Amongotherthings,we call
attentionhereto one ofthepotentiallyundesirable imposedbythelogisticform
restrictions
used in eithermodel. We also discusssome estimation
issues.
LikelihoodFunction. Despite the differences
discussedearlier,the CLGT and
MNLGT modelssharea commonlikelihoodfunction:
log L = ' (ll)
yi,P

wherey,1= 1 ifindividuali choosesalternative j and equals 0 otherwise.The difference

betweenthemodelsis in theformulation ofthechoiceprobabilities,as in equations(1) and
(2), and in theunderlying behavioralmodelsthattheyrepresent.As a practicalmatter,these
differences in thewaythedataareprepared
oftenlead todifferences forestimation and in the
software programs used to estimatethetwomodels.
StatisticalSpecification.Both the CLGT and MNLGT modelsare based on the
assumptionthatthe errortermsin equations(6), (8), and (10) followan extremevalue
distribution and are independent acrossalternatives.The assumptionof independenceis
critical;any otherassumptionleads to substantial computational difficulties
involvingthe
computationof multivariate integrals.The "cost"of the independenceassumptionis the
so-called"independence ofirrelevant (IIA) problem.As derivedfromequation
alternatives"
(2), theratioofthechoiceprobabilities foranytwoofthej alternatives dependsonlyon the
characteristics of those two alternatives.If, for example, there is a change in the
characteristicsofanyotheralternative in thechoiceset,thisproperty requiresthatthetwo
probabilitiesmustadjustprecisely in orderto preservetheirinitialratio.7This is equivalent
to assumingthatthepercentage changein each probability is equal, a responsepattern that
maybe an unwarranted and inappropriate restriction.
For example,thepossibility thatone
choiceprobability mightbe moregreatly affectedbysuch a changeis thereby excluded.
As a practicalmatter,the independenceassumptionis mostlikelyto be problematic
whenthe alternatives are similarto one another,so thatunobservedfactors affectingone
alternative maywellaffect anotheralternative.The IIA assumption can be tested(Hausman
and McFadden, 1984). Ifit is notsupported, thereare twogeneralalternatives. One is the
conditionalprobitmodel,whichallowsformultivariate normalcorrelated errorterms.The
otheris thenestedlogitmodel(Hausmanand McFadden,1984;McFadden,1981)in which
the choice processis viewed as a set of nestedchoices. This approach retainsthe
computationaladvantagesof the logit formbut selectivelyrelaxesthe independence
assumption and thereby allowsa varietyofresponsepatterns toa changein thecharacteristics
ofone alternative.
StatisticalSoftware. Most general-purpose softwarepackagescontain a
statistical
bivariate logitprocedureand an MNLGT procedure.Software toestimatetheCLGT model
is less common.Our CLGT estimation uses the DiscreteChoice procedureavailablein
LIMDEP; theMNLGT modelis estimated withLIMDEP's Logitprocedure.The Mlogit
procedurein SAS can be used to estimateboththeMNLGT and CLGT models.
EstimationDetails.8 The estimationof a CLGT model is somewhatunorthodox,
because the unitof analysisis, in some sense, not the individualbut, rather,the set of
availableto each individual.
alternatives
ConsiderN individuals, each ofwhomhasJalternatives. To estimatea CLGT model,
an individual'srecordis transformed into Jdistinctrecords,each one representing an
alternative
forthatindividual.The alternativesarerepresentedin thesamesequenceforeach
individual;the firstrecordrepresentsalternative1, the secondalternative
2, and so on to
420 Demography,
Vol. 25, No. 3, August1988

recordand alternative7. The explanatoryvariablesare similarlyconstructedto reflectthe

valueofeach variableforeach individualin each alternative.
An individual's
choiceamong
is indicatedbya 1 fortheappropriate
thealternatives record;theotheralternativesarecoded
0.
Table 1 illustrates the typicaldata structure forCLGT estimation.In thisexample,
therearethreealternatives foreach offourindividuals, whochoosealternatives 3, 2, 1, and
There is one X variableand one Z variable;the inclusionof individual
2, respectively.
means thatthe model is reallya mixedmodel ratherthan a pure CLGT
characteristics
model. Z11 is the value forindividual1 of some characteristic in alternative1, Z12 is the
value of thatcharacteristic forthatindividualin alternative 2, Z21 is the value of that
forindividual2 in alternative
characteristic 1, and so on. Estimationofthismodelwould
yielda singlecoefficient forZ.
The finaltwocolumnsshowhowan attribute thatis invariantacrossalternatives can be
introducedto createa mixedlogitmodel. Let D2 be a dummyvariableequal to 1 for
2 and 0 fortheotheralternatives,
alternative and letD3 be definedsimilarly foralternative
3. The variablesin thefinaltwocolumnsareD2X and D3X; justas in MNLGT estimation,
theygive the effectof variableX relativeto an omittedcategory,here alternative1.
Estimation ofthismodelwouldyieldthreecoefficients-one each forZ, XD2, and XD3. If
desired,constanttermsfortwoalternatives could be constructed by usingD2 and D3.
Thereis an additionaland particularly usefulfeature ofCLGT models.In somechoice
situations,not everyalternative is availableto everyindividual.For example,women
withoutchildrenare categorically ineligibleto receiveAFDC, and onlywomenlivingin
statesoffering
theAFDC-UP program can chooseto be bothmarriedand receiving welfare;
onlywidowswithlivingchildrencan choose to live withtheirchildren;onlyindividuals
owningcarsor livingnearbus routescan driveortakethebus to work,respectively. Taking
properaccountof differences in the size and compositionof the choice set availableto
specificindividualsis troublesome undermostcircumstances and oftenleadsto clumsy,ad
hoc solutions.The samplemaybe partitioned so thattheanalysisis no longergeneral,or 0
valuesmightbe assignedfortheindependent variablesin caseslikethatconcerning AFDC
benefitsofwomenineligibleto receiveAFDC.9 A morenaturalsolution,however,is simply
toeliminatean irrelevant alternativefromthechoicesetforan individual. '0 Withthechoice

Table 1. TypicalData Structure

forCLGT
Estimation

Dependent
Alternativevariable Z XD2 XD3
Individual

1 1 0 Z,1 0 0
2 0 Z12X1 0
3 1 Z13 0 Xi
2 1 0 Z21 0 0
2 1 Z22 X2 0
3 0 Z23 0 X2
3 1 1 Z31 0 0
2 0 Z32 X3 0
3 0 Z33 0 X3
4 1 0 Z41 0 0
2 1 Z42 X4 0
3 0 Z43 0 X4
Multinomialand ConditionalLogitModels 421

set as the unit of observation,

tailoringthe choice set to individualcircumstances
is a
straightforward
matter.

An EmpiricalExample:Remarriageand WelfareChoices of
Divorcedand SeparatedWomen
In thissection,we examinetheremarriage and welfarechoicesofdivorcedorseparated
women.We presentestimates ofthreemodels-a standard MNLGT modelwithindividual
characteristics as explanatory variables,a pure CLGT model withcharacteristics of the
alternativesas explanatory variables,and a mixedmodelthatincludescharacteristics ofboth
theindividualand thealternatives.
Our analysisis based onldata fromthe Panel Studyof IncomeDynamics(PSID) on
whitewomenunderthe age of 45 who becamedivorcedor separatedbetween1969 and
1982. Each womanis observedfromthedateofherdivorceor separation untilremarriage,
theend ofthepanelobservation period,orthesixthpost-divorce/separation year,whichever
comesfirst. Our dataare in person-year event-history format, definedovera spellofbeing
"unmarried."Formally,we are estimating a discrete-time hazard model of time until
remarriage, usinlg an MNLGT or CLGT modelas theestimation procedure.Time-varying
independent variablesare measuredas oftheperson-year used in theanalysis.See Allison
(1982, 1984) fora generaldiscussionofdiscrete-time hazardmodels.1
In each year,a womanis observedin one ofthreealternative states:she can remarry,
she can remainsingleand receivewelfare,or she can remainsinglewithoutreceiving
welfare.We use functionial ratherthan legal definitionsof marriage,divorce,and
remarriage. Unmarried couplesaretreated as married bythePSID iftheyresidetogether for
twoconsecutive interviews;giventhisdefinitioni, we can analyzethe"remarriage" choiceof
separatedwomen.Welfarereceiptis definedas receiving a dollaror moreof incomefrom
AFDC or the "otherwelfare"category used in thePSID. 12
We are interestedin analyzingthe determinanits of the trichotomous choice of
remarriage, welfarereceipt,and remaining singlewithoutwelfarereceipt.The motivation
includesunderstanding the potentialroleofAFDC incomein discouraging remarriage as
wellas themoregeneraldeterminants of remarriage decisions.
One explanation, castin termsofindividualcharacteristics, mightfocuson suchthings
as a woman'sage and education,thenumberofchildrenshe has, and whether she resides
in an urbanarea. We estimatethismodelwiththeMNLGT model.
A different explanationmightconsider,instead,the exogenousincome(the income
availableto a womanat zerohoursofwork)and hernet(after-tax) wageratein each ofthe
threealternatives. This correspondsto a modellikeequation(6) in whichthevalue of an
alternativeis a functionof itscharacteristics, hereexogenousincomeand prices.Techni-
cally,we are usingtheconceptof indirectutility functions in whichthemaximumutility
(satisfaction)
availableto an individualin an alternative dependson itsexogenousincome
and thesetofprices(in our model,thewagerate)it provides.
Consider,first, theexogenousincomeavailableto a womanin each alternative. While
someincome,suchas childsupport, and incomefromdividends and interestareunaffected
by her choice of alternative, othercomponenits varysystematically by alternatives. For
instance,ifshe wereto acceptwelfare, shewouldreceivethelegallymandatedbenefits paid
in herstateofresidence,givenherfamilysize and otherincome.Ifshe wereto marry, she
wouldbe ineligibleforwelfareand benefits, 13 butshe wouldhaveaccessto someportion of
her new husband'sincome. If she remainedsinglewithoutacceptingwelfare,she would
receivealimonyand/orchildsupportincome,ifany,plusanyincomefromdividendsand
interest.
Her after-tax wage ratewouldalso differ acrossalternatives,even thoughthe market
422 Demography,
Vol. 25, No. 3, August1988

(pretax)wageratefora particular womanis likelytobe constant acrossalternatives.

After-tax
wagesare particularly low in thewelfarealternative byvirtueofthehighbenefitreduction
rateappliedto earnedincomein welfare and theexistence ofan earningsceilingto maintain
welfareeligibility.
This model,in whichchoiceamongalternatives is a function oftheexogenousincome
and wagecharacteristics of each alternative,is estimated withthe CLGT model. We also
estimatea mixedmodelthatincludestheindividualvariablesfromtheMNLGT modeland
thealternative-specificvariablesfromtheCLGT model. In boththepureCLGT and the
mixedmodels,we allow the numberof alternatives to varyacrossindividuals.Women
withoutdependentchildrenand womenwithsubstantial nonlaborincomeare ineligiblefor
welfare,and thusthatalternative is notavailableto them.
The characteristicsofthesample,includingsamplesize and mean value ofall ofthe
independent variables,are presented in Table 2. The MNLGT resultsappearin Table 3,
columns1 and 2. The coefficients expresseffectsrelativeto the omittedcategory, single/
welfare.We findthatmoreeducatedwomenare morelikelyto be eithermarriedor single/
no welfarethantobe receiving welfare, whereasresidencein an urbanareaand havingmore
childrenbothdecreasethoseprobabilities. Olderwomenaremorelikelyto be singleand not
receivewelfare, buttheyareno morelikelytobe married.Despitethestatistically significant
it is noteasyto explainwhythesevariableshavetheimpactsthattheydo: Do
coefficients,

Table2. Characteristics
ofPSID Sampleof
WhiteWomenUndergoing Divorce
orSeparation,
1969-1982

Characteristic No. Mean

Samplesize
Persons 460
Person-years 1,269
alternatives
Person-year 3,304
Married 1,269
welfare
Single/no 1,269
Single/welfare 766
Individual
characteristics
Age 30.9
Years ofeducation 12.1
No. of children 1.4
Urban residence 0.28
Economiccharacteristics
ofthealternatives
($)
AFDC income
(thousands) 3.68
Spouse incomea
(thousands) 16.26
Wage ratea
Married 4.80
Single/nowelfare 5.59
Single/welfare 1.30

Note: Allfigures inthetableare weighted to adjustfor

differential
samplingproportionsand nonresponse rates.
are expressedin 1982 dollars.AFDC =
Alldollarfigures
Aidto FemalesWithDependent Children.
a Computed on an after-tax
basis.
Multinomial
andConditional
LogitModels 423

Table3. EstimatesofRemarriage
and WelfareChoicesofDivorcedand SeparatedWhiteWomen,
PSID, 1969-1982

MNLGTmodel CLGTmodel Mixedmodel

Variable Married Single Married Welfare Single Married Welfare Single

Constant -2.918* -4.682* -2.408* - 2.587* - 3.004* - 3.415*

(0.873) (0.783) (0.542) (0.499) (1.001) (0.922)
No. of children -0.680* -0.818* 0.31 7*
(0.093) (0.080) (0.076)
Age 0.017 0.094* 0.024 0.081*
(0.018) (0.016) (0.020) (0.018)
Education 0.363* 0.435* -0.216* -0.249*
(0.065) (0.057) (0.093) (0.093)
Urban residence -0.731 * -0.613* - 0.578* - 0.548*
(0.238) (0.203) (0.270) (0.247)
Husband's -0.018 0.047*
incomea (0.017) (0.022)
AFDC income 0.192* 0.202*
(0.051) (0.055)
Wage ratea 1.102* 1.102* 1.102* 1.492* 1.492* 1.492*
(0.107) (0.107) (0.107) (0.162) (0.162) (0.162)
Nonlabor - -0.011 0.215* -0.102 0.182*
income (0.090) (0.076) (0.092) (0.076)
Number of
cases 1,269 1,269 1,269 766 1,269 1,269 766 1,269
Log-likelihood -950.4 -828.4 -770.0
a
Predicted
value,after
tax.
*Significant
atthe5 percentlevel.

the resultsreflectdifferences in opportunity, or does behaviordiffer even givenlsimilar

opportunities?The negativeeffect ofchildrenon remarriage is illustrative,
sinceone might
well hypothesizethatmarriage wouldbe especiallyattractive to womeniwithchildren.The
estimated coefficientsare usefulfordetermininig whomakeswhichchoice,buttheyare less
usefulforexplainingwhyshe does so.
The pureCLGT modelis shownin columns3-5. We see therethatthe incomeofa
woman's(potential)new husbanddoes not have a significant effecton the probability of
remarriage;theeffect is, in fact,negativebutverysmall.14 In contrast, theamountofAFDC
benefitshas a positiveand significant effecton the probability thata womanwill be on
AFDC. We findthatnonlaborincome(mostlycomposedofalimonyand/orchildsupport)
has no effect
on theprobability ofbeingmarriedrelativeto welfare, butthatitincreasesthe
probabilitythata womanwillbe singleand notreceiving welfare. 15
Interpretation
oftheestimated effect
ofa woman'swagerateis illustrative oftheCLGT
approach.As shown,thewagecoefficient is large,positive,
and significant. Itscocfficient
has
been constrained to be equal acrossalternatives, reflectingthe assumption thata dollarof
after-tax
incomeis equallyvaluablein each alternative. The positivecoefficient, therefore,
indicatesthathigherwagesincreasethevalue ofan alternative.
Althougha woman'swage ratehas thesame effect on utilityin each alternative, this
does notmeanthatithas no effect on herchoiceamongthealternatives. The effect ofany
variableon choiceprobabilities derivesfromthedifference in itsvalueacrossalternatives [see
424 Vol. 25,No. 3, August1988
Demography,

eq. (5)]. Thus a woman'swage rateaffects herchoice,dependingon how herwagevaries

across alternatives. That variation,in turn,dependson the estimatedincome of her
prospective husband,thescheduleofwelfarebenefits in herstate,and herown wagerate.
For example,becauseafter-tax marriedand singlewagesaresimilarformostwomen,16 the
wageratedoes notgreatly affectthechoicebetweenmarrying and remaining single.It does,
however,substantially affectthechoicebetweenthosetwoalternatives and welfarebecause
after-tax welfarewagesare sharplylower.Moreover,the difference betweenwelfareand
nonwelfare wagesis greatest fortwogroupsof women:womenin statesthatprovidelow
welfarebenefits,a practicethateffectively imposesa verylow maximumwage rate,and
high-wage women,sincetheabsolutedifference betweenwelfareand nonwelfare wagerates
is greatest forthem.17
Finally,considerwhatwouldhappeniftherewerea $1 increasein a woman'spretax
wagerate.Utilitywouldrisein each alternative by 1.102 (thecoefficient on thewage rate
fromTable 3) timesthe resulting increasein after-tax wages.Thus, forexample,utility
wouldincreaseleastin thewelfarealternative, againbecauseofitshightaxrate.Although
utilityin each alternative is now higher,it is, ofcourse,impossiblefortheprobability that
each alternative is chosento increasesimilarly.Rather,the resulting choice probabilities
wouldbe calculatedbyusingequation(2) andsubstituting thenewsetofafter-tax wagerates.
In thiscase, theprobability ofchoosingwelfare wouldfall,sinceitsutility levelis nowlower
relativeto theothertwoalternatives.
Estimatesof the mixedmodel are presentedin columns6-8. Coefficients on the
individualcharacteristics nlow showthe impactof thesecharacteristics, net of a woman's
economicopportunities; as in theMNLGT model,theyaremeasuredrelativeto thesingle/
welfarealternative. Many of thesecharacteristics are now estimatedto have substantially
different and more readilyinterpretable effects on remarriage and welfarechoices. For
example,the numberof children'8a womanhas is now seen to increasethe utilityof
marriage and hencetheprobability thatshe willremarry, aftercontrollingforhermarriage
opportunities. This finding nicelyseparatesthe negativeimpactof childrenon remarriage
opportunities fromtheir positiveimpact onl remarriage,given those opportunities. 19
Additional yearsofeducationnowreduce,rather thanincrease,theprobability ofbothbeing
marriedand beingsingle/no welfare,relativeto beingon welfare.Urban residencestill
lowerstherelativeprobability ofbeingeithermarriedorsingle/no welfare,and age similarly
increasesthe probabilities. As forthe characteristics of the alternatives,
the income of a
woman's potentialspouse is now estimatedto be positiveand statistically significant,
althoughitis stillrelatively smallin magnitude. The effect ofAFDC is virtually unchanged
bytheadditionoftheindividualcharacteristics.
Finally,we notethatboththe pureCLGT model and the mixedmodel are ideally
suitedto simulationof policychangeswhenever, as in thiscase, thecharacteristicsof the
alternatives aredetermined bygovernment policy.One can easilyassignnewvaluesto reflect
thepolicychangeofinterest and thenrecalculatetheappropriate probabilitiesbyusingthe
estimated structuralparameters.20 One can alsodo thisforthepureMNLGT model,butthe
resultsof,forinstance,simulating theeffectofa changein thenumberofchildrena woman
has or in her education are less informative and less directlyamenable to policy
manipulation.

Summary
This articlehas providedan introductionto and illustration
ofthe use of conditional
logitto estimatemultiple-categorydiscrete-choice
problems.CLGT is closelyrelatedto the
better-known MNLGT model,but it derivesfromdifferent behavioralassumptions and is
estimatedin different form.The CLOT modelis appropriate wheneverit is reasonableto
Multinomialand ConditionalLogitModels 425

assumethatindividualchoicesamongavailablealternatives are a functionof the relevant

ofthosealternatives,
characteristics rather thantheattributesoftheindividual.In thelatter
case, MNLGT estimation is appropriate.We argue,however,thatsucha modelis usually
a reduced-form nonbehavioral modeland thusis of somewhatmorelimitedinterest. We
believethatmanyissuesofinterest to demographers fallnaturally
and othersocialscientists
intoa CLGT model.
thekeydifference
Statistically, betweenthetwomodelsinvolvestheunitofanalysis:in
an MNLGT model,theindividualis theunitofanalysis,whereasin a CLGT model,the
setof alternativesis the unitof analysis.The explanatory variablesof a CLGT model are
primarily characteristicsofthealternatives, variables,such as personal
butindividual-level
attributes,can be readilyaccommodatedin a CLGT model. Anotherusefulfeatureof a
CLGT model is its abilityto allow fordifferences in the availablealternatives among
individuals.
We illustrated thedifference betweentheseapproachesbyconsidering thepostdivorce
choicesof womenregarding maritalstatusand welfarereceipt.Estimatesof threemodels
werepresented: (1) an MNLGT modelthatused individualcharacteristics as explanatory
variables;(2) a CLGT model in which the after-tax wage rateand exogenousincome
availableto a womanin each ofthreealternatives weretheexplanatory variables;and (3) a
mixedlogitmodelthatincludedthevariablesfromthefirst twomodels.
In themixedmodel,we foundthatmarriage (as measuredbytheincome
opportunities
ofa woman'spotential spouse)havea modestpositiveimpacton theprobability ofremarriage
andthatAFDC benefits havea slightly stronger
negativeimpacton remarriage. Interestingly,
we also findthatwomenwithmorechildrenaremorelikelyto remarry, once we controlfor
theirpoorermarriageopportunities.

Notes
A reviewof 10 issues of Demography (publishedbetweenFebruary1984 and May 1986)
produced10 examplesof discrete-choice researchusinga logitmodel. Seven of the 10 involved
two-categorydependent variables-Masseyand Mullen(1984)analyzedthepresenceofyoungchildren
in a household,Landale and Guest (1985) mobilityplans and actions,Tienda and Glass (1985)
women'slabor forceparticipation, Entwisleand her colleagues(Entwisleet al., 1984; Entwisle,
Mason, and Hermalin,1986)contraception behavior,DaVanzo and Habicht(1986) infantmortality,
and Bellerand Graham(1986) the presenceof a child-support award.Examplesof three-category
choice models include Lehrerand Kawasaki's(1985) analysisof a child care modal choice and
Leibowitz,Eisen, and Chow's (1986) analysisof teenagepregnancy decisionmaking.Robinsand
Dickinson(1985) estimated a four-categorymodelofwelfareand childsupport.
2 The threemultiple-category modelsidentified in note 1 are all examplesofmultinomial logit.
Leibowitz,Eisen, and Chow (1986) used conditionallogitto describewhat is more commonly
consideredmultinomial logit.
3 Although noneofthestatistical methodsdescribedhereis new,and discussions ofsomeofthe
issuescan be foundin statisticaland econometrics texts(see Ben-Akiva and Lerman,1985;judgeetal.,
1980;Maddala, 1983),we knowofno applieddiscussionthatfocusesexplicitly on theissuesdiscussed
here.
4 For modelingand estimation purposes,thedistinction drawnbetweenMNLGT and CLGT is
usefuland instructive.The modelsdo, however,sharea commonlikelihoodfunction; see thethird
sectionfora discussionofthis.
5As in CLGT, themixedlogitmodelusesthealternative as theunitofanalysis.Whatwe call
mixedlogitis sometimes referredtoas "multinomial logit,"withthepureMNLGT and CLGT models
treatedas specialcases in whichonlythecharacteristics ofalternatives or ofindividualsare used (see
Amemiya,1985;Ben Akivaand Lerman,1985).We findthisterminology confusing,sinceitsuggests
model in questionis the morefamiliarand significanitly
thatthe statistical pure MNLGT
different
modelof equation(1).
426 Vol. 25, No. 3, August1988
Demography,

6 BoththeCLGT and MNLGT modelsare basedonltheassumption thattheerrortermsfollow

an extremevaluedistribution and are independent See thethirdsectionfordetails
acrossalternatives.
on the implicationsofthisassumption.
iftheoriginalprobabilities
7 For instance, forsomeindividualarePI = 0.4, P2 = 0.4, and P3 =
0.2, then an increasein PI to 0.52 would necessarily cause P2 and P3 to fall to 0.32 and 0.16,
respectively.This property holdsonlyforthe ratioof probabilitiesforan inidividualand notforthe
aggregate proportionof individualsmakinga particularchoice.
8 The discussionthatfollowsis basedon therequirementsofLIMDEP's DiscreteChoice program;
Mlogitproceedssomewhatdifferently.
9 Assigning0 valueswillnot,in fact,producethecorrect probabilityforthoseindividuals.As can
be seenin equation(2), ifZ = 0 forsomealternative,thenexp(Za) = exp(0)= 1. Sincethisalternative
does notexistfortheindividualin question,theprobability ofitsselectionshouldbe zero;insteadit
wouldturnoutto be 1/(1+ , exp(Zikcx), wherethesummation is takenoverall otheralternatives.
As
a result,theotherprobabilities wouldbe too low.
10This can be done readilywithLIMDEP's DiscreteChoice program. The same thingcan be
done forMNLGT programs, butwe knowofno software it.
thatfacilitates
II A similarprocedureusinga moreelaboratemixedmodelis detailedin Hoffman and Duncan
(1987).
12 The "otherwelfare"category includesGeneral Assistanceand some misreported AFDC
income.Eventhoughthe$1 threshold issomewhat Ellwood(1986)showedthatas a practical
arbitrary,
matter,thereis littledifference betweenvariousthresholds.
13 There is a minorexception to thisin statesthatpermitotlherwise eligiblemarriedcouplesto
receivebenefits undertheAFDC-UP program.It is sufficiently rare(about 150,000cases nationally
peryearduringtheperiodwe analyze)thatour datasetprovidestwofewcasesto permitanalysis.
14Although theincomeofa newhusbandispresumed tobe relevant tothedecisionofall women,
itis observedonlyforwomenwho remarry. Thus we use an estimated valueofnewhusband'sincome
forall womenin the sample,based onla regression model fiton the womenwho remarried. The
incomeofa woman'snewspouseis estimated ofherown personalcharacteristics
as a functioni (age,
numberof children,residence,etc.) and thoseof her formerhusband,includinghis incomeand
education.Since remarried womenmaynotbe a randomsample,evenofthosewhoare observation-
ally identical,we also correctforpossibleselectionbias, usinga techniqueoutlinedby Lee (1983).
(Estimatesofthespouseincomeequationare availablefromtheauthors.)
15 The effect ofnonlaborincomeis measuredrelative tobeingon welfare. We treatedthevariable
in thisway(likeMNLGT estimation) becausethereis insufficientvariation in nonlaborincomeacross
thealternatives. Nonlaborincomediffers onlyforwomenwitlh alimony-weassumedthattheywould
lose theiralimonyiftheyremarried-andrelatively fewwomenreceivedanyalimony.
16 They differ in our analysisbecause we treather incomeas marginalto her husband'sand
computeherafter-tax wagerateonlthatbasis.Averagemarriedwagesare about90 percentofaverage
singlewages,althoughthereis some variation,dependingon the incomeof a woman'sprospective
spouseand theirnonlaborincome.
17 These twoeffects mayrequirefurther First,theabsolutedifference
elaboration. betweenwelfare
and nonwelfare after-taxwagesis largerforwomenwithhighernonwelfare wages. Second, when
welfarebenefitsare relatively low, the maximumincome thatcan be earnedwhile maintaining
eligibilityis also low. Since a womancannotearnmorethanthisamount,she faceswhatamountsto
a zerowagerateon welfare once she reachesthatlevel.This effect is strongerin low-benefit
statesand
forhigh-wage womenthanlow-wagewomen,sincein bothcases themaximumearningsamountis
morereadilyattained.
18 Note thatwe have assumedthatthe numberof childrena womanhas affects, otherthings
equal, onlythevalue ofthemarriage alternative.We note,in passing,thattheabilityto so constrain
a coefficient is an advantageoftheCLGT model.
19 We foundthateach additional childreducedtheincomeofa potentialspouseby 7 percent.
20 See Hoffman and Duncan (1987) fora simulationoftheeffects ofchangesin welfarebenefits
on cumulativeremarriage rates.
Multinomialand ConditionalLogitModels 427

Acknowledgments
This articlcis basedon researclh
supportedbv NationalInstitute and Human Developmeicnit
forChild I-Health
GrantIROl HD 19339-01.It has beniefited fromhelpfulcommcnits bv Johln
Bounid,DorothvDuncani,Robert
Hutchens,WillardRodgers,GarvSolon, and ArlandThornitoni. We also thaniktwoanonivmousrefereesand the
deputveditorforthcircommncits.h'lec orderoftheauthors'namtes was determinied
randomlv.

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